There have been a few big events in the past 50 days which would make me think the market is different today than it was 50 days ago.

For one the Federal Reserve has dropped interest rates and committed to backing up money market funds as well as short term commercial paper. I definitely think that this removed some risk for investors.

A large part of the fear was that companies would face serious solvency issues. I think companies access to funding (either selling new shares or selling bonds) have made this less of a concern in the short term.

Additionally, Congress passed bills to extend unemployment benefits and fund 2 months of payroll expenses for small businesses. While we have to wait to see the effects I don't think it is unreasonable to expect that paying people not to work will have some impact on inflation.

I completely agree that we are not out of the woods yet with regard to this pandemic but I would say that we are 50 days closer to being on the other side. 50 days ago, in the New York/New Jersey area where I live, our government officials were telling us we were days or in some cases hours from having our hospial ICU's at full capacity. While I am not saying that we can't find our selves in the same situation again, I do think we are in a different place now.

>You don't make an investment on the basis of "you can't prove to me this won't happen"

Just to make sure I am 100% clear. I am not making investment advice. I have no idea if the stock market will go up or down. You made the claim that the market will drop by 30%. I was interested in how you came up with that number.

I'm gonna go with:

0) A pandemic has caused the government to shut down a double-digit percentage of the economy.

Sure. People are basically betting that stock prices are cheap right now, and if they hold onto them for a few years they'll be back to where they were.

Look at the 2008 recession. If you bought then you'd be doing very well.

They're basically betting that the worst has already been priced-in. In a sense, they're probably betting that we won't get a totally calamitous re-opening of the shutdown, or a totally calamitous fall and winter next year. But, in any case, most people adhere to the idea that stock prices always go up eventually, and therefore they buy accordingly.

I keep seeing retrospective rationalizations on Reddit saying the market "is priced in" based on a perceived mismatch between market gains and reality. I don't understand how this is true when each corner yields something unexpected.

I'd love to make large buys of stocks at a time like this, but I have no idea whether my job/company/industry is safe. Last time I was laid off from work was particularly rough for me, and I'm only just now getting back on my feet.

The uncertainty of the situation is probably making many others think twice before buying/spending so that's going to make it harder for stock prices to recover in the short term.

I'm not sure if you're implying this but the stock market never was an indicator of the economic health of the country. Its an indicator of the economic health of the wealthy (tautologically, since its where most wealthy individuals park their wealth) , and for that its been pretty accurate.

The reason I used TSLA as an example is because this is pretty close to what happened there! The future scenarios 'priced in' to that company now are several degrees beyond ludicrous. I don't think I'm missing the point at all, which to me is: massive swaths of the entire market are super irrational right now, and have been for a while, with no end in sight.

> no one, least of all me, can predict future stock prices

This seems more true to me today than it ever has been. After all the shit I've seen happen with stocks in the past few years (2020 especially), things I used to consider impossible I no longer do. None of this makes any sense any more. I don't really have the stomach for it, honestly, the whole thing makes me nauseous. But if I want my meager savings to do anything other than lose value, I still have to try to evaluate what's going on to weigh my choices.

Personally, I think things are happening too fast to gauge what investor activity is actually reacting too. There can be big movers who are still in decision-making stages and their actions have yet to be made, or they acted hastily and sold, then come back and repurchase, etc.

Multiple reasons IMO:

- the stock markets have long ago diverged from reality towards "financial engineering"

- tech and service companies which form an ever larger share of the economy aren't hit by supply chain issues at all, the only thing that hit a bit was big advertisers cutting the ad budgets early in the corona crisis

- lots of stocks are held by pension funds and other slow-as-molasses, long term holding entities

- for those parts of the markets that still are based on the real world, it's betting on the future - and the corona disruptions are going away rather sooner than later, at least for the Western world plus China where by the end of the year even children should be able to get vaccinated (and governments seem to shift towards "if the unvaccinated want to die by corona, let them die", which is crass given that at the moment children can't be vaccinated at all, but understandable from a politics point of view). South America and Africa aren't important markets or labor source for companies on the Western stock markets which means the stock markets don't (have to) care about the low vaccination rates there.

- in contrast, companies that are hit hard by supply chain issues (like your company, farms and other small businesses) aren't listed on the stock exchanges meaning their issues don't get passed through on the stock market

- for some of the companies (esp. the car industry), the stocks have taken a bit of a downturn (e.g. Ford -10% over 6M), but again - most people are believing that once the supply chain issues resolve themselves, customers will come and make all the purchases they couldn't over the last two years thanks to corona

Most people think probably, since the stock markets have always recovered after previous crises. But it might potentially take weeks, months, or years (if the impact of the pandemic and other troubles causes an ongoing weakness in the economy). There's also a risk that particular companies or industries will be so severely affected that they never fully recover; for example, individual companies could go bankrupt or could be acquired at a lower valuation than their peak value.

Here in California, which currently has a less disruptive COVID-19 outbreak (and less disruptive responses to it) than much of Europe, there have already been reports of some small businesses failing. Someone who invested in those businesses on the assumption they would later recover could have lost the whole investment. Larger businesses can fail, too, though usually on a longer time scale. For example, it's possible that some travel-related companies that are especially impacted by reduced travel will have to sell off their assets and operations to other companies, maybe at a comparatively low value.

The point of this is that, in general, stock markets as a whole, and economic sectors as a whole, have always recovered from crises and disasters -- potentially providing profit on some timescale to people who invested during a crash -- but that this may sometimes take a very long time¹ and is definitely not guaranteed for any individual company. Therefore there is never an opportunity to invest in stocks with absolutely no risk, although a financial advisor may be able to help you estimate and manage your risk.

Even if a particular community is convinced that a certain stock or the market as a whole will probably move in a certain direction, it's never a guarantee. Your gamble may have a positive expected value, but that doesn't disqualify it from being a gamble.

¹ If you get really unlucky, there could be other economic disruptions that interrupt the recovery (other disease outbreaks, natural disasters, political instability, wars, effects of climate change?) and so the economy may not recover on the timescale that you expected it would.

This is not a properly functioning stock market. People are reacting to massive money injection by the government and the government picking upcoming winners and losers.

> by weighing the prior ~15 years of companies' profits

Are they also adding in the fact that 80% of the last 15 years has been due to life-support QE?

> Even a 12 month period of $0 profits should decrease the NPV of a firm's future earnings by 10%, not 50%

... maybe a 12 month period of $0 NET profits, but what about 12 months of $0 total revenue? For many, many companies that is not a 10% drop in NPV, but bankruptcy.

I agree we will return to a new normal, but what does that look like? Do we just go back to permanent QE like before where the debt market is artificially inflated forever? Or is this bad enough that the government gets to be part of larger corporate decisions now?

There is no model where the next 12 to 24 months looks "bright" for almost any company, so the fact that the stock market is mooning is not rational right now. Trying to justify it as "properly functioning" seems very, very far off base to me.

Yes, and I don't understand it. The S&P500 is within 8% of its all-time high (3393). Even without a second wave of coronavirus cases and deaths, the current levels of unemployment, defaults, and bankruptices, I can't see what supports these asset price levels. Any ideas?

Not saying their right but Wall St. types will tell you the market has already priced the pandemic and current unemployment numbers in and is forward looking.

Are you saying that because stock prices are dropping that the market has reacted to excessive headcount?

Cause I think a better explanation for that, is that in the past 2 years we've had inflation, and that was reflected in the profits of the companies for 2020-21, and now that the fed is lowering interest rates, we're expecting that inflation to stop, and so that's affecting the stock market.

This seems to have very little to do with these companies business models, and everything to do with them failing to recognize that their profit changes are readily explained by inflation/deflation. Which seems to be a better explanation of what the markets are reacting to.

I’ve been investing in the market since I graduated college many, many, many years ago. Over time, the market has gone up reaching new highs.

Every few years I felt like it was overvalued. More recently, I remember looking at my portfolio in 2015 and thinking it was overvalued and bound to crash. In Nov 2017, I felt the same way. In 2019, I was in a meeting with a manager at my company and somehow the stock market came up. We agreed it had grown too much and was due for a significant correction.

In March/April 2020 I had friends who panic sold during COVID.

I follow a few personal finance websites, and there’s a story every few weeks or months about someone predicting a collapse.

My strategy hasn’t changed at all. I’ve been purchasing VTSAX every month for many, many years now.

Yup, gotta protect that shareholder value! sigh

I happen to agree, which is why I struggle to explain the last few week's stock price gains for companies that can hardly adapt e.g. DRI, SIX. Sit-down restaurants and theme parks.

But please, do explain economics for us. We really need to hear about markets again. #coolmemebro

> That is of course extreme

I don’t think that’s even that extreme. In 2020 the market crashed something like 40% and at the same time vast swaths of the population became unemployed. All of my grandparents experienced the great depression. We will be very fortunate if we aren’t heavily hit by war or economic disasters for the rest of our life.